Accounting for Non-Profits in India: A Leadership Perspective
- Dohit Muranjan
- Oct 29
- 6 min read
NGO Finance Series - Part 3
By Dohit Muranjan & Ritu Jain
Lessons from working with 400+ NGOs over the last 15 years at Aria CFO Services
In the world of non-profits, financial management is far more than paperwork. It is about demonstrating accountability, building trust, and ensuring compliance. Donors, regulators, and beneficiaries alike rely on your financial statements to understand whether resources are being used responsibly.
In Part 1: Building a Finance Function That Grows With Your NGO, we introduced the finance function “map” and the five roles that make it work—CFO, Head of Finance, and the three operating pillars: Legal & Compliance, Accounts, and Finance Operations. In Part 2: Legal & Compliance function that enables your NGOs growth, we showed how compliance becomes a growth guardrail when it’s embedded in daily work. This Part 3 focuses on the Accounts pillar: the systems, routines, and controls that turn transactions into timely, comparable reports leaders and donors can trust.
Here’s the challenge: if every organisation prepared statements in its own way, confusion, inconsistency, and loss of trust would be inevitable. That’s why accountants follow a common set of rules, concepts, and conventions — frameworks that help non-profits present their financial story in a credible and comparable way.
When a donor looks at your financial reports, do they see clarity and consistency — or just numbers without context? The answer often depends on the strength of your accounting systems. Without clear structures, reports can become fragmented and difficult to compare across projects and years. Aria CFO Services works with leaders to strengthen reporting systems and, through capacity building and training programmes, we equip finance teams with the skills to generate reports that inspire confidence among donors and stakeholders.
What this post covers
Bookkeeping vs. Accounting: The Often Overlooked Distinction
The Foundation: Accounting Concepts Every Leader Should Know
Why Financial Statements for Non-Profits Look Different
Beyond Numbers: The Leadership Responsibility
The Backbone of Financial Discipline: Key Tasks of an Accountant in a Non-Profit
Bookkeeping vs. Accounting: The Often Overlooked Distinction
Many leaders use the terms “bookkeeping” and “accounting” interchangeably — but they are not the same.
Bookkeeping is the foundation: capturing every transaction in an orderly and permanent way. It answers the question: What happened?
Accounting goes further: classifying, summarising, interpreting, and communicating financial information. It answers: What does this mean?
The real question for leaders is this: Is your finance function stuck at merely “recording,” or does it also “interpret and inform” decision-making at the leadership table? Many teams remain trapped in transactional bookkeeping, never realising their potential as strategic partners. Aria CFO Services supports leadership and finance teams in bridging this gap. Our planned capacity-building workshops will empower accounting staff to move from data entry to decision support, enhancing the organisation’s strategic capabilities.
The Foundation: Accounting Concepts Every Leader Should Know
Behind every financial statement are certain assumptions and principles. Leaders don’t need to memorise them all, but understanding their implications is crucial:
Going Concern: Can the organisation sustain itself in the near future? If funding is drying up, are disclosures transparent?
Consistency: Are accounting policies applied consistently year after year, allowing meaningful comparisons?
Accrual: Are commitments, such as unpaid salaries or sanctioned grants, reflected even if cash hasn’t moved?
Consider this scenario: if tomorrow your finance head resigned, would your board and leadership still understand the story behind your financial statements? Leaders cannot afford to view accounts as technical jargon. Aria CFO Services simplifies financial concepts for boards and leadership — and through our upcoming training programmes, equips finance teams to maintain continuity and confidence, even during leadership transitions.
Why Financial Statements for Non-Profits Look Different
Unlike businesses, non-profits don’t measure success by profits; their purpose is service, not shareholder wealth. That’s why they prepare a different set of statements:
Receipts and Payments Account: A cash-based record of money in and out, showing liquidity but not true financial performance.
Income and Expenditure Account: Similar to a Profit & Loss Account but prepared on an accrual basis, showing whether you have a surplus or deficit after matching income and expenses.
Balance Sheet: A snapshot of your financial position, where the difference between assets and liabilities is the Capital or Accumulated Fund, not “equity.”
Specific-purpose funds (like building funds, prize funds, or donor-restricted grants) are shown separately, and their usage is tracked carefully.
When leadership reviews financials, the focus often stays on the bottom-line surplus or deficit. But the critical question is: how are restricted funds being tracked and reported? Donors expect clarity, and lapses here can erode trust. Aria CFO Services helps organisations strengthen compliance and fund tracking systems. Through our upcoming training sessions, we aim to equip finance staff with hands-on skills to manage these complexities with confidence.
Beyond Numbers: The Leadership Responsibility
Financial statements are not just compliance tools; they are trust-building documents. They communicate:
How resources were raised
How faithfully they were applied to charitable purposes
What remains for future use
Leadership’s role is not limited to approving accounts at year-end. It is to ensure the systems behind them inspire confidence — with donors, regulators, and beneficiaries alike.
For leaders, a self-check is in order: do board discussions on finance go beyond reviewing numbers, to questioning assumptions and disclosures? Is your finance function empowered to highlight risks, not just report balances? Are reports shared transparently with stakeholders, or only with auditors and funders?
Moving from “compliance mode” to “strategic partner” requires leadership commitment and capable teams. Aria CFO Services supports this transition through advisory and hands-on engagement, and soon, through structured training workshops for accounting staff, we will build the skills that enable finance functions to contribute strategically rather than just operationally.
The Backbone of Financial Discipline: Key Tasks of an Accountant in a Non-Profit
Behind every accurate financial statement is a finance professional quietly ensuring that the records reflect reality. While leaders focus on strategy and impact, accountants build the structure that holds financial integrity together.
Here are the core tasks that keep the system running — each critical for transparency, compliance, and trust:
Cash and Bank Reconciliation – Ensures the cash and bank book tally with bank statements, preventing errors and fraud while giving a real picture of liquidity.
Maintenance of Chart of Accounts, Ledgers, Cost Centres, and Groupings – Provides structure to record and report transactions by donor, project, or activity, ensuring clarity in reporting.
Supporting Documentation – Bills, receipts, and petty cash records validate every entry, satisfying auditors and maintaining accountability.
Donor Allocations – Ensures expenses are correctly mapped to donors and projects, supporting accurate utilisation reports and fund tracking.
Budget vs Actual Alignment – Tracks deviations and spending discipline, enabling management and donors to understand variances.
Payroll & Statutory Payments (TDS, PF, ESIC) – Ensures accurate calculation and timely deposit of statutory dues, maintaining compliance and credibility.
Periodic Accounts Closure & Trial Balance Review – Keeps books updated and identifies discrepancies early, supporting timely reporting.
Statutory Compliance & Return Filing (GST, PT, TDS, PF) – Ensures timely filings, preventing penalties and regulatory risks.
Preparation of MIS Reports – Converts numbers into insights — showing trends, variances, and utilisation patterns for leadership review.
As a leadership team, do you have visibility into whether these foundational tasks are being performed systematically? If your team needs guidance in strengthening these accounting practices or upskilling staff on NGO-specific finance requirements, Aria CFO Services can help through process reviews, training, and system implementation support.
Final Thought
For non-profits in India, good bookkeeping and accounting are not about ticking boxes. They are about credibility, transparency, and stewardship of entrusted resources. A well-structured accounting system strengthens impact and builds lasting trust with donors. Leaders who view financial reporting as a strategic tool, not a statutory burden, empower their teams to deliver more for society.
Here’s a final reflection: when was the last time you, as a leader, read your organisation’s financial statements not as a compliance report, but as a mirror of your stewardship? Strong systems, skilled teams, and informed leadership together make that mirror clear. With Aria CFO Services — through advisory, workshops, and our upcoming capacity-building sessions for finance staff — your organisation can ensure its financial reporting reflects not just numbers, but the integrity of its mission.
Capacity-Building: Train Your Accounting Team
For leaders interested in strengthening their finance teams, Aria CFO Services is launching capacity-building training sessions for accounting staff soon.
Please register via this Google Form to express your interest and receive detailed information about the training sessions. You can also write to ravib@ariaadvisory.in or dohit@ariaadvisory.in
Missed earlier parts of the series?
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